Preparing for Due Diligence in the Sale of Your Business

It may seem like Due Diligence is far away when you are preparing to sell your business,  however, you should start preparing for Due Diligence now. Getting an offer for your business is great,  but you will have to successfully get through Due Diligence to actually sell it. If you have all the materials prepared in advance Due Diligence will go more quickly and be much easier for you.  

Things to Prepare for Due Diligence:

Below is a list of common Due Diligence items and information requested by Buyers, their CPAs, and in some cases SBA Lenders and Escrow.  There is a lot of information needed to complete Due Diligence, however, if you prepare in advance Due Diligence will go more smoothly and you won’t be scrambling to prepare all of the information at the last minute.  We recommend having PDF copies of the information below in separate folders on your computer or preferably in a Dropbox folder ready to share. During Due Diligence we will set up a Dropbox folder to share with the Buyer and their CPA.  

  1. PDF copies of last 3 years Federal Corporation Tax Returns

  2. PDF copies of last 3 years P&Ls (Cash basis or Accrual basis if Tax Returns are Accrual based)  

  3. Most recent month end A/R report (Check for accuracy)

  4. Most Recent month end Balance Sheet 

  5. Inventory Value 

  6. Employee List 

  7. Year to Date P&L and Balance Sheet (most recent month end) 

  8. PDF copies of last 3 years bank statements and Year to Date statements

  9. Copies of your Workmans Comp and General Liability insurance

  10. PDF copies of your corporate Articles of Incorporation, Bylaws, and Stock Certificates 

  11. Equipment list with estimated equipment values and VINs/Serial numbers for all equipment valued over $5,000 (we will send you a list to update) 

  12. Payroll report summaries last 3 years (note: in some cases CPAs may also request copies of W2s) 

  13. Owner W2s last 3 years and year to date Payroll Report 

  14. Lease 

  15. Copies of all Business Licenses

  16. Seller Disclosure Statement (we will send this to you when an offer has been accepted via Docusign) 

There may be other items requested for Due Diligence depending on your business type and/or model. Some Due Diligence materials may have to be viewed and gone over on site. Ie: Invoices, sales orders, employee records etc.  There will also be questions from the buyer and/or buyers CPA. As a Business Broker it is our role to facilitate the on site meetings and field any questions that come up in order to streamline the Due Diligence process as much as possible. Due Diligence is one of the most important steps in the selling process of your business.